The iShares Nasdaq Biotechnology ETF (IBB) popped more than 2 percent on Wednesday, after a U.S. report on Medicare spending showed the government insurer's growth rate hasn't exceeded a target that could trigger cost cuts.
The ETF ended the day modestly higher.
The reprieve relates to a provision in the Affordable Care Act focused on Medicare spending. If spending growth by the government insurer surpasses a certain threshold, a group called the Independent Payment Advisory Board (IPAB) is tasked with recommending cost reductions. Investors feared this could be triggered for 2016, leading to lower spending on drugs.
"Medicare spending didn't trigger initiation of the Independent Payment Advisory Board to slash costs, a relief for the beleaguered drug industry whose shares have slumped since the start of the year" Art Hogan, of Wunderlich Securities said in an email to CNBC.